Triad ( TRI) looks like a company on the mend. The Texas-based hospital chain posted healthy first-quarter results that beat Wall Street expectations and -- perhaps more importantly -- exposed no troubling surge in bad debt expense. The company blew past both revenue and profit estimates and saw its bad debt ratio stabilize just above the 10% mark in the latest period. In contrast, the nation's two largest hospital chains -- HCA ( HCA) and Tenet ( THC) -- have predicted that bad debts, triggered by a spike in uninsured patients, will gobble up roughly 12% of their revenue this year. Thus, Wall Street took some comfort in Triad's latest report. "Triad's bad debt expense was in line with expectations, which was an encouraging sign," wrote Prudential Equity analyst David Shove, who has a neutral rating on Triad's stock. "Triad could be nearing stability in this troublesome operating expense." Triad's stock jumped 7.1% to $33.99 on news of the solid quarter.
Saving the Day
Triad posted particularly strong top-line growth, with revenue jumping 23% to $1.13 billion and easily beating analyst expectations. A surge in patient admissions drove the revenue hike. On a same-facility basis, the company grew inpatient admissions by 5.9% and inpatient surgeries by an even stronger 6.9%. It also enjoyed a sharp 12% rise in patient revenue. CIBC World Markets analyst Charles Lynch was clearly impressed. "Top-line growth carried the day," declared Lynch, who has a sector perform rating on Triad's shares. "Same-store revenue growth was likely the strongest first-quarter showing in the hospital group." Triad toppled bottom-line expectations as well. The company posted first-quarter operating profits of 66 cents a share that were a full 7 cents ahead of the consensus estimate. Bad debt expenses, which came in lower than expectations, helped out. But Shove saw other reasons for the upside surprise as well. He pointed to nonoperating metrics, such as increased minority income and lower tax rates, as big contributors. Excluding those factors, he said, Triad would have actually reported profits that were in line with expectations.